The right of first refusal

The right of first refusal

The right of first refusal to purchase clause on a lease may seem clear at the time a lease is negotiated and it is usually viewed as an incentive to the tenant since it does not cost anything. However, a right of first refusal, unless it is very clearly stated on the lease, might complicate matters.

The right of first refusal gives the option to the tenant that before the landlord/seller can sell the property, the tenant must be given the opportunity to purchase it for the same price, terms, and conditions as the offer received from an outside third party.

1. The lease shall state a specific amount of days for the tenant to respond as to whether he accepts or rejects his right to purchase the property.

2. The lease must give certain amount of days for the tenant to have the purchase contract drawn and executed after he/she is notified of an outside offer has been received

3. The provision should state if this is a one-time right or if it continues during the term of the lease for every offer the landlord receives.

4. The third party offer must be in writing and signed by the prospective buyer before it is presented to the tenant for his consideration.

5. One of the complications that it may occur is that if the tenant declines to meet the price being offered by the outside third party, and later on the property closes a a lower price, after the initial agreed price is reduced due to defects found during inspection period, the tenant may claim he was not given the opportunity to buy at the lower price.

6. All communications must be transmitted in writing and are time sensitive.

7. The lease shall define very clearly if any sale to a third party is going to be subject to the existing lease or if tenant or landlord may have the right to terminate the lease at the time of the sale.

Any Realtor® taking a listing with a lease in place should be made aware by the owner if a right of first refusal is in effect. The Realtor® should review these provisions and clearly understands whether or not the listing Realtor® would be entitled to a commission in case such right of first refusal is exercised by the exiting tenant. The Realtor® should be prepared to assist owner/landlord navigate these troubled waters.

Do you have questions about purchasing or selling a property with a tenant in place in Miami or Sarasota Florida ? Contact our Florida agents today at info@kijner.com. You'll be glad you did :)